Beer Store, LCBO win out on regulated conduct defence

Beer Store, LCBO win out on regulated conduct defence
Michael Eizenga, partner and co-head of the class actions practice at Bennett Jones LLP, says that when a company’s actions are authorized by valid provincial legislation, the company can’t be civilly liable for those actions.

A $1.4-billion class action lawsuit launched in 2015 against the Beer Store has been dismissed by the Ontario Superior Court of Justice.

The case involved restaurant owner David Hughes who brought the action on behalf of “all persons in Canada who purchased beer in Ontario during the class period”, against the Liquor Control Board of Ontario, Brewers Retail Inc., majority owners Labatt Breweries of Canada LP, Labatt Brewing Company Limited, Molson Coors Canada, Molson Canada and minority owners Sleeman Breweries Ltd.

Hughes sought damages of $1.4 billion and punitive damages of $5 million for damages.

The allegations were that the Beer Store and LCBO “unlawfully conspired to allocate sales, territories, customers or markets for the supply of beer in Ontario between June 1, 2000 and the present.”

The plaintiffs claimed that as a result of an agreement made in 2000 to allocate the market for the supply of beer in Ontario between the Liquor Control Board of Ontario and the Beer Store, consumers and restaurant/bar owners were overcharged for the beer they bought.

The sale of alcohol in Ontario has always been regulated by the province and regulations fall under the Liquor Control Act. 

“Since the end of prohibition, virtually every aspect of the manufacture and supply of beer has been subject to significant regulatory oversight,” says Michael Eizenga, partner and co-head of the class actions practice at Bennett Jones LLP, the lead counsel for the Beer Store.

“Although it’s a multi-faceted case, this accords with common sense and that is when a company’s actions are authorized by valid provincial legislation the company can’t be civilly liable for those actions.

“Our perspective was that virtually every aspect of the distribution and sale of beer is heavily regulated — the court was able to straightforwardly apply the existing jurisprudence to conclude we had a regulated conduct defence,” says Eizenga.

The plaintiffs have 30 days to commence an appeal.

When reached for comment, plaintiff counsel Tyler Planeta of Siskinds LLP said,  “Important aspects of Mr. Hughes’ case — like whether a breach of the market allocation provisions of the Competition Act occurred — remain unresolved. As Justice Perell acknowledged, this is a case with exceptional facts, and we’re reviewing the decision with our client to consider our next steps.”

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